IMF crisis opens the door to emerging nations
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Strauss-Kahn's arrest isn't expected to impede the IMF's day-to-day functioning. The executive board can still approve loan packages. And it's expected to authorize rescue loans to Portugal as part of a larger package that European finance ministers negotiated Monday.
"There is a management team there, and a senior staff, and they will continue to make decisions and recommendations to the executive board," said Edwin Truman, a senior fellow at the Peterson Institute for International Economics.
Still, Strauss-Kahn's arrest complicates delicate negotiations among European leaders and the IMF over whether and under what conditions to send more aid to Greece. Last year's aid package hasn't been enough to resolve Greece's debt crisis. Speculation is rising that Greece may have to restructure its debts.
"An element of uncertainty has been injected at a time when the situation is extremely fragile," said James Rickards, senior managing director at Tangent Capital Partners.
Before his arrest, Strauss-Kahn was widely expected to step down within months and run for president of France. So the IMF's executive board has likely already been considering replacements.
A new managing director could be selected as early as June or July, Rickards said. A global financial summit will be held in November in Cannes, France, and the IMF will be under pressure to have a new permanent leader in place well before then.
The IMF's second-in-command, John Lipsky, who was named acting managing director, is viewed as more of a technocrat than Strauss-Kahn, with less political sway, particularly in Europe. And Lipsky has said he will step down in August, when his term ends.
"The combination leaves the IMF leaderless at the most critical time in its existence since the end of World War II," Rickards said.
Strauss-Kahn is regarded as one of the savviest leaders in the IMF's 64-year history, with deep ties to European policymakers. He played a vital role in negotiating last year's joint European Union-IMF bailout package for Greece and other struggling European countries.
He's also been viewed as an effective advocate for Europe's interests before the IMF's executive board, which represents its member countries.
